The union representing Air Canada's customer service and sales agents has ratified a 21-month contract with the cash-strapped carrier, saying it was not ideal, but helps the company avoid bankruptcy.

The Canadian Auto Workers said late on June 18 that 76 percent of its 4,500 members at Air Canada had ratified a collective agreement that freezes wages and pension benefits.

The deal includes some quality of life improvements, such as increased rest periods, and pension security for current and retired employees. It also restricts compensation for company executives, the union said.

The new agreement also gives Air Canada a 21-month moratorium on funding its C$2.9 billion (US$2.56 billion) pension deficit, a provision that all five of the company's unions must approve.

Labor and pension agreements with unions and new financing are critical to keeping the company, hard-hit by a downturn in traffic and tough competition, from filing for bankruptcy for the second time in six years.

Three other unions have tentatively agreed to labor and pension deals, with the union representing about 6,700 flight attendants the lone holdout on non-pension issues.

The government appointed two mediators this week, with a June 22 deadline to forge an agreement.